Negotiations with minority shareholders dragged out longer than expected but on April 27 Equitas Resources TSXV:EQT officially made the transition from Labrador nickel explorer to Brazil gold producer. On closing its acquisition of Alta Floresta Gold, Equitas now takes over a modest gold operation with the intention of increasing production—and cash flow—incrementally. Should all go to plan, that would bring a step-by-step payback for each new stage of the operation, as well as funding for further exploration.

That certainly contrasts with the traditional exploration model, with which investors can be quick to show impatience. Equitas experienced that first hand after just one season of drilling its Garland project, despite its compelling nickel-cobalt-copper story south of Voisey’s Bay.

In operation since June, the Cajueiro project holds potential for greater recovery, as well as expansion of near-surface oxides.

Looking for alternative financing, then-president/now-chairperson Kyler Hardy learned about Alta Floresta’s Cajueiro project through a friend in the company. Hardy not only liked its potential. He also recognized a good fit between the two companies’ teams.

Alta Floresta brings to Equitas its 100% interest in six gold properties with four production licences, part of a portfolio covering more than 184,410 hectares in Brazil’s central states of Mato Grosso and Para. The flagship Cajueiro project’s Baldo zone has been in operation since June, producing around a kilogram of gold a month. That amounts to recovery of only about 30% to 35%, achieved by running alluvium and saprolite through a sluice box.

Equitas hopes to see considerable improvement within months by installing a gravity plant, then about 85% recovery with carbon-in-leach processing that could begin early next year. Full open pit production would be a longer-term goal.

We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages.—Chris Harris, president/CEO of Equitas Resources

The plan is to “develop the project in stages and each stage has to pay for itself,” explains new president/CEO Chris Harris. “We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages. That could also provide cash flow for a sustaining exploration program which we hope would then beget further development.”

Of course these are perilous times for Brazil, now undergoing serious recession, a wide-ranging corruption scandal and impeachment proceedings against President Dilma Rousseff. Compounding the problems are their effect on the Brazilian real, which contrasts with currently high gold prices. “But what that’s doing to our project is creating huge cost compression,” Harris says. “That benefits both capex and opex.” The company has already selected a nearly new gravity plant in the region for purchase. Its price has sunk to less than half of what he projected last year.

Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

Except for one property slightly north, the entire portfolio sits on the Juruena gold belt, which has historic estimates of seven to 10 million ounces of artisanal output. Straddling the border between Para and Mato Grosso states, the 39,053-hectare Cajueiro property’s near-term agenda could include bulk sampling and trenching, as well as diamond and rotary air blast drilling. Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

A just-filed 43-101 technical report recalculates data from a 2013 resource estimate to allow for different gold price and opex numbers. The new study bases a cutoff of 0.25 grams per tonne on a near-surface deposit that can be processed by cyanidation or gravity processing. The report provides separate numbers for four zones of sulphides and oxides.

All four zones show near-surface oxide expansion potential, Equitas states. Five other anomalies offer additional encouragement.

The project has road access to the city of Alta Floresta, 95 kilometres north. A hydro dam now under development should bring electricity within two years, if not sooner.

The arrangement combines talent from both companies. Harris casts a close eye on the accounts, having 30 years’ experience in energy, commodity trading and mining finance with companies like Ernst & Young, CIBC, Enron UK and BHP Billiton NYSE:BHP.

Hardy, through 16 years as a resource sector entrepreneur and executive, demonstrates a facility for operating remote, logistically complex exploration projects. Director Alan Carter, who also sits on the board of Eric Friedland’s Peregrine Diamonds TSX:PGD, brings 30 years’ exploration experience with the likes of Rio Tinto NYSE:RIO, BHP, and ECI Exploration and Mining, among others.

Cajueiro’s alluvial lure suggests expansion potential to Equitas.

Co-director David Hodge also serves as president of Zimtu Capital TSXV:ZC, a project generator that supports several juniors with acquisitions and advisory services. VP of exploration Everett Makela began his career with Inco, eventually retiring as Vale’s (NYSE:VALE) principal geologist for North America. His international experience includes Brazil.

Mike Bennett, a local resident and director of Equitas subsidiary Alta Floresta Mineração, has spent 23 of his 30 exploration years in South America where he took part in three gold discoveries, Puquio North in Bolivia, as well as Coringa and Cajueiro in Brazil.

Also residing locally, Portuguese/English-fluent Richard Crew acts as operations consultant for Alta Floresta Mineração. His 30 years of experience includes positions as operations manager and COO for numerous companies worldwide. Another nearby resident, project manager and exploration geologist Elvis Alves knows the community as well as the minerology.

The deal has Equitas issuing 103.65 million shares to former Alta Floresta shareholders and 5.28 million options, exercisable at $0.15 for three years, to former Alta Floresta option holders. A 1.75% NSR applies to licences acquired two years ago from a former minority shareholder of Alta Floresta.‎

Earlier this month Equitas closed the final tranche of a private placement that totalled $1.5 million from 30 million units. Insiders bought 10.4 million units.

“We’ll be talking about implementing the gravity plant very shortly,” Harris says. “We’ll also be talking about starting our drilling plan, the drill results and possibly a revised 43-101. We’ll have a steady news flow.”